VILSHOFEN, Germany, Feb 14 (Reuters) - Germany’s Social Democrats (SPD) must seize the opportunity to reform the European Union in a new governing alliance with Chancellor Angela Merkel, the party’s interim leader said on Wednesday in appealing to members to back their coalition deal.

The SPD’s 464,000 members vote in a postal ballot beginning on Feb. 20 on whether the party should go ahead with the agreement its leaders clinched last week to renew their power sharing alliance with Merkel’s conservative bloc.

Olaf Scholz, appointed SPD interim leader on Tuesday, said EU reform plans included in the coalition agreement were a strong reason to back the deal.

“The window of opportunity is now, not in five or 10 years - maybe then it won’t be there any more,” he told party members gathered in a beer tent in Vilshofen, in the southern state of Bavaria. “We need to act now.”

The coalition deal envisages stronger Franco-German cooperation, allocating budget funds for economic stabilisation in Europe, increased German contributions to the EU budget, and transforming the ESM bailout fund into a European Monetary Fund.

But EU reform, which has moved up the agenda with Britain poised to leave the bloc next year, is an issue that fails to resonate with many party members who are more concerned with jobs and working conditions.

SPD leaders, facing a slump in opinion polls, have their work cut out to convince rank-and-file to endorse the coalition deal with Merkel, a re-run of the power-sharing arrangement they began in 2013.

Many within the SPD harbour misgivings about sharing power with Merkel, believing the party should rebuild in opposition after suffering its worst result in last September’s election since Germany became a federal republic in 1949.

Results of the SPD ballot are due on March 4. A “no” vote would likely lead to new elections, prolonging uncertainty in Europe’s most populous country and economic powerhouse.

The SPD has slid into disarray since its leaders struck the coalition deal last week, blighted by bitter divisions over whether to join the coalition, a loss of confidence in outgoing leader Martin Schulz and discontent over the succession process.

Seeking to restore order, Schulz resigned with immediate effect on Tuesday and party leaders installed Scholz as caretaker SPD chairman. They also confirmed that they recommended parliamentary floor leader Andrea Nahles as Schulz’s longer-term successor.

The manner in which Schulz originally anointed Nahles as his successor - without broad consultation - rankled with many in the party and resulted in Scholz being appointed as interim leader on Tuesday.

An extraordinary party congress will be held on April 22 to pick a new leader, likely Nahles.

Scholz played up the SPD’s achievements in coalition negotiations with Merkel’s Christian Democrats (CDU) and her Bavarian allies, at which the centre-left party won the powerful finance ministry to the frustration of many in the CDU.

“One has only to look at the discussion in the CDU to know that we must have got it right somehow,” said Scholz.

“Not only has a Bavarian politician passed the pinnacle of his career, but probably a woman from the north too,” he added in a dig at Merkel and Horst Seehofer, leader of the arch-conservative Bavarian sister party (CSU) to Merkel’s CDU. (Writing by Paul Carrel; editing by Mark Heinrich)